The Falling Rupee and the Surge in Gold Imports

 Falling Rupee Hits 88.8 Mark Amid Gold Import Surge

The Indian rupee recently reached an alarming low of 88.8 against the US dollar, triggered by an unprecedented surge in gold imports. This event marked a 0.7% depreciation in just a single trading session, the steepest decline in eight months. Such volatility in the forex market has raised concerns among forex trading experts, who are closely monitoring the rupee's movement in light of rising gold and silver imports.

In October 2025, India saw gold imports soar by a staggering 200% compared to the previous year. This contributed significantly to India's trade deficit, which ballooned to a record $41.68 billion. The festive season, which typically drives gold purchases in India, further accelerated the demand for precious metals, causing gold imports to spike in a way not seen in recent years.

Rupee’s Decline Amid Negative Equity Markets

The fall in the rupee's value was influenced by a combination of domestic and international factors. Foreign Institutional Investor (FII) outflows, totaling ₹240.10 crore, contributed heavily to the rupee’s depreciation. Additionally, the Sensex and Nifty indices both recorded losses, amplifying the downward pressure on the currency. The forex market reacted quickly, with analysts predicting that the rupee could continue to weaken, especially if foreign capital continues to exit the Indian market.

However, despite these negative trends, there was some support for the rupee. A slight dip in crude oil prices and the Reserve Bank of India's (RBI) interventions helped mitigate a further decline. The RBI is expected to continue its efforts to prevent the rupee from falling below the critical 88.80 level, which represents a historical low for the currency. For forex traders, this market intervention by the RBI is an essential factor to monitor, as it will play a pivotal role in stabilizing or further depreciating the rupee.

Gold Imports Surge 200% YoY in October 2025

October 2025 saw gold imports reach INR 1240.39 billion, nearly doubling from the previous year’s INR 415.15 billion. This surge is primarily attributed to the festival season, with consumers purchasing vast amounts of gold in anticipation of Diwali. The increase in imports has widened India’s trade deficit considerably. It was reported that Indian consumers spent INR 928.18 billion during the five-day Diwali festival alone, reflecting the cultural and economic significance of gold in the Indian market.

This import surge not only put pressure on the rupee but also highlighted structural vulnerabilities in India’s economy. Gold imports are typically a significant contributor to India’s trade imbalance, and the sharp increase in imports has raised concerns about the long-term sustainability of the country’s external balance.

Silver Imports Also on the Rise

In addition to gold, India saw a massive 530% increase in silver imports in October 2025, further straining the trade balance. Silver demand is driven by both investment needs and industrial uses, such as in solar panels and electronics. The reduction of import duties on silver earlier in the year has made it more affordable, encouraging a surge in imports. These rising silver imports, alongside gold, are pushing India's overall trade deficit to new heights.

The combination of the soaring import bills for gold and silver, along with the fall in exports, has created a precarious situation for the Indian rupee. Forex markets are increasingly nervous, and analysts are speculating that the rupee could break the psychological 90-mark against the dollar unless corrective measures are taken swiftly.